Back to GetFilings.com

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

OR

Commission file number 1-652

UNIVERSAL CORPORATION

(Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code — (804) 359-9311

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  ¨

Indicate the number of shares outstanding of each of the Registrant’s classes of Common Stock as of the latest practicable date:

Common Stock, no par value — 24,834,287 shares outstanding as of April 29, 2003

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Universal Corporation and Subsidiaries

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

Three and Nine Months Ended March 31, 2003 and 2002

(In thousands of dollars, except per share data)

See accompanying notes.

1

Universal Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

See accompanying notes.

2

Universal Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

See accompanying notes.

3

Universal Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended March 31, 2003 and 2002

(In thousands of dollars)

See accompanying notes.

4

Universal Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2003

All figures contained herein are unaudited.

Other contingent liabilities total approximately $15.1 million and include value-added tax payments that would be required if subsidiaries fail to export tobacco. They also include bid and performance bonds.

The Company considers the possibility of a material loss on any of the guarantees and other contingencies to be remote, and the accrual recorded for exposure under them was not material at March 31, 2003.

If the political situation in Zimbabwe were to deteriorate significantly, the Company’s ability to recover its assets there could be impaired. The Company’s equity in its net assets of subsidiaries in Zimbabwe was $41 million at March 31, 2003.

5

merchants as defendants in DeLoach, et al. v. Philip Morris Inc., et al., a suit originally filed against U.S. cigarette manufacturers in the United States District Court for the District of Columbia and now pending in the United States District Court for the Middle District of North Carolina, Greensboro Division (Case No. 00-CV-1235) (the “DeLoach Suit”). The DeLoach Suit is a class action brought on behalf of U.S. tobacco growers and quota holders that alleges that the defendants violated antitrust laws by bid-rigging at tobacco auctions and by conspiring to undermine the tobacco quota and price support program administered by the federal government. Plaintiffs seek injunctive relief, trebled damages in an unspecified amount, pre- and post-judgment interest, attorneys’ fees, and costs of litigation. On April 3, 2002, the United States District Court for the Middle District of North Carolina issued an opinion and order certifying the class. The Company Subsidiaries petitioned the U.S. Court of Appeals for the Fourth Circuit for appeal of the class certification pursuant to Rule 23(f) of the Federal Rules of Civil Procedure, and the petition was denied. Trial is currently scheduled for April, 2004. The Company Subsidiaries intend to vigorously defend the DeLoach Suit. The suit is still in its initial stages, and at this time, no estimate can be made of the impact on the Company that could result from an unfavorable outcome at trial.

The Directorate General—Competition of the European Commission (“DG Comp”) is investigating the buying practices of Spanish tobacco processors with the stated aim of determining to what extent the tobacco processing companies have jointly agreed on raw tobacco qualities and prices offered to Spanish tobacco growers. After conducting an investigation, the Company believes that Spanish tobacco processors, including the Company’s Spanish subsidiary, Tabacos Espanoles, S.A. (“TAES”), have jointly agreed to the terms of sale of green tobacco and quantities to be purchased from associations of farmers and have jointly negotiated with those associations. TAES is cooperating fully with the DG Comp in its investigation and believes that there are unusual, mitigating circumstances peculiar to the highly structured market for green tobacco in Spain. At this time, no estimate can be made of the amount or timing of the fine, if any, that the DG Comp may assess on TAES.

Changes in severance liabilities are shown below:

6

The Black-Scholes option valuation model was used to estimate the fair value of the options granted in the quarter and the nine months ending March 31, 2003, and 2002. The model includes subjective input assumptions that can materially affect the fair value estimates. The model was developed for use in estimating the fair value of traded options that have no vesting restrictions and that are fully transferable. For example, the expected volatility is estimated based on the most recent historical period of time equal to the weighted average life of the options granted. Options issued under the Company’s option plans have characteristics that differ from traded options. In management’s opinion, this valuation model does not necessarily provide a reliable single measure of the fair value of its employee stock options. Principal assumptions used in applying the Black-Scholes model along with the results from the model were as follows:

7

8

In its fourth quarter, the Company will take a charge of $12.5 million before taxes, or $6.5 million after taxes and minority interests, because it is in the process of restructuring its operations in Zimbabwe in response to expectations of smaller crops there in the future.

In addition, the Company expects to recognize a fourth quarter gain of about $17 million, or approximately $12 million after minority interests, on remeasurement of local currency debt in the African region, resulting from government adjustment of the export exchange rate. This gain will not be taxable in the country of origin. Consistent with Company policy, there will be no provision for U.S. income taxes on the gain. Consequently, the Company expects its overall effective tax rate to be unusually low in fiscal year 2003 at approximately 32%. We are unable to estimate at this time the Company’s overall effective tax rate in fiscal year 2004, except the rate should return to 36%, at a minimum.

9

Liquidity and Capital Resources

Working capital at March 31, 2003, was $425.3 million compared to $431.6 million at June 30, 2002, a decrease of approximately $6.3 million. Although this decrease in working capital was small, its components primarily reflected normal seasonal patterns. Our tobacco inventories at $530.9 million were about $77.5 million higher than the balance at June 30, 2002. Inventories usually increase during the first half of the fiscal year when tobacco is received and processed in Africa and the United States, and is awaiting shipment to customers. During the third quarter, the balance begins to decline again reaching a low point in the fourth quarter. Inventory is usually financed with a mix of cash, notes payable, and customer deposits, which depends upon our borrowing capabilities, interest rates, and exchange rates, as well as those of our customers. Customer deposits provided $103.7 million of the needed funding, up $20.2 million from the seasonally low June balance. We generally do not purchase material quantities of tobacco on a speculative basis; thus, the increase in inventory represents primarily tobacco that has been committed to customers. In January 2003, we acquired JéWé, a leading distributor of lumber and building products to do-it-yourself markets based primarily in The Netherlands and operating in other European countries. The JéWé acquisition and the strength of the euro caused most of the $56.6 million increase in lumber and building products inventory.

With some exceptions, our international tobacco operations generally conduct business in U.S. dollars, thereby limiting foreign exchange risk to local processing and overhead costs. However, for those tobacco and non-tobacco subsidiaries who conduct their business in other currencies, changes in currency exchange rates can affect the translation of their financial statements, and in some cases give rise to currency gains or losses. Agri-product and lumber operations enter into foreign exchange contracts to hedge firm purchase and sales commitments for terms of less than six months. Interest rate risk is limited in the tobacco business because customers usually pre-finance purchases or pay market rates of interest for inventory purchased for their accounts. As of March 31, 2003, interest on over 60% of our $937 million in debt was based on variable market interest rates in order to better match the interest rates that we charge our customers.

We invested about $312 million in our operations during the nine months ended March 31, 2003. That amount represents $156 million in net cash used in investing activities and $156 million in changes in operating assets and liabilities. The investments were an acquisition, capital expenditures, seasonal increases in working capital items, such as inventory and receivables, and additional working capital items needed as we continued to replace the volume decline in Zimbabwe. In January 2003, we spent about $69 million in an acquisition, and capital expenditures, primarily related to our U.S. projects, totaled about $87 million during the nine months. About 75% of the remaining $156 million increase in operating assets was seasonal, and included both the $77.5 million increase in tobacco inventory and about $53 million of the $86.3 million increase in advances to suppliers. The remaining 25% was an increase in working capital investment above our usual seasonal requirements. This expenditure was needed to build volumes in several African countries to replace the decline in Zimbabwe.

10

We funded the $312 million investment, as well as $49 million in stock repurchases and $27 million in dividend payments, using about $250 million in debt, about $9 million of available cash, and $129 million in additional cash produced by our operations during the nine months. The $250 million increase in debt comprised the $228 million increase in notes payable and the $63 million in long-term debt, net of the $41 million decrease in the current portion of long-term obligations.

During the first nine months of fiscal year 2003, we purchased nearly 1.3 million shares of our common stockfor approximately $49 million, leaving 24.9 million shares outstanding as of March 31, 2003. Of the $450 million approved by our Board of Directors, approximately $103 million remained available for future purchases. Our total shareholders’ equity has increased since June 30, 2002, primarily because when we translated the accounts of our euro-based subsidiaries to U.S. dollars, the stronger euro caused a $19 million increase in accumulated other comprehensive income, which is a component of shareholders’ equity.

By December 31, 2002, we had issued $99.5 million in medium-term notes with interest rates ranging from 5.1% to 6.1% and maturities ranging from five to ten years. The issuance completed the sale of all of the securities registered pursuant to a $400 million shelf registration filed in 2000. On February 12, 2003, we filed a shelf registration statement with the Securities and Exchange Commission to register $400 million in debt securities under the Securities Act of 1933. That registration is not yet effective. In addition, on February 28, 2003, we retired $120 million of 8.5% notes at their maturity.

On December 26, 2002, one of our subsidiaries entered into a secured $12 million term loan. Universal Corporation guaranteed the loan, and it is secured by an aircraft. It matures on December 31, 2007, and under some conditions, which include minimum credit ratings, earnings levels, and the absence of default, our subsidiary can exercise an extension option for an additional four years. The proceeds of these financings were used for general corporate purposes.

On April 7, 2003, we entered new bank facilities totaling $375 million. The facilities replaced those totaling $295 million, which we terminated on that date. Of the new issue, $125 million represents a term loan that will mature on April 7, 2006. We received the proceeds of that loan on April 10, 2003, and used them to reduce short-term notes payable. The remaining $250 million is a revolving credit facility that also matures on April 7, 2006. The latter facility is intended to support short-term borrowings, including the issuance of commercial paper. Both agreements require that we meet financial covenants relating to minimum tangible net worth, minimum working capital, and maximum levels of long-term debt.

We believe that our liquidity and capital resources at March 31, 2003, remained adequate to support our foreseeable operating needs.

Results of Operations

Net income for the third quarter, ended March 31, 2003, was $23.8 million, or $.94 per diluted share, compared to $33.1 million, or $1.26 per diluted share, in the third quarter of fiscal year 2002. For the nine months, net earnings were $79.0 million, or $3.08 per diluted share, compared to $90.5 million, or $3.38 per diluted share a year ago. Results for the nine-month period ended March 31, 2003, include $14.8 million in restructuring charges before taxes, $9.5 million after taxes, related to the consolidation of U.S. operations.

11

Revenues were $594 million in the quarter and $2 billion for the first nine months of fiscal year 2003 compared to $547 million and $1.9 billion, respectively, in the comparable periods of fiscal year 2002.

Tobacco segment operating income of about $54 million was lower in the quarter reflecting a decline in shipments from a number of origins including the United States and Europe, and from our Oriental joint venture. Despite higher sales of South American tobacco during the quarter, margins were lower resulting in a decline in comparable period earnings from sales of that origin’s tobacco. Results for the nine months of $166.4 million lagged last year’s levels by $3.4 million, primarily as a result of the significant decline in African shipments and lower old crop Oriental leaf sales. South American volumes were up sharply for the nine months, with large volume increases recorded in both Brazil and Argentina. Strong demand for Brazilian leaf continues to be driven by efforts by manufacturers to replace volumes lost in Zimbabwe due to the continuing political turmoil in that country. Argentine leaf has become more attractive in world markets as a result of the devaluation of the peso. Dark tobacco leaf sales were lower both in the quarter and in the nine months reflecting lower volumes in both periods.

Lumber and building products segment operating income was down by about $1.7 million in the quarter and $1.5 million for the nine months as construction activity continued to be negatively impacted by the sluggish Dutch economy. However, the benefit from the weaker dollar in both periods significantly helped to alleviate a decline in the earnings of these operations on translation to the U.S. dollar. Agri-products results were also lower by $400 thousand for the quarter and by $1.4 million for the year to date due to unfavorable market conditions for tea and canned meats. This was partially offset by a good performance in nuts and dried fruit. Confectionery sunflower seeds experienced higher sales volumes in the quarter, but continued to be down for the nine months.

So far, the year has developed much as we had expected with the Company facing significant challenges in a number of areas. One of these has clearly been the streamlining and consolidation of U.S. operations where a $14.8 million before-tax charge has been incurred to right-size our U.S. operations to be able to compete effectively in the U.S. market. As we have said before, U.S. crops will continue to decline as customers continue to seek more competitively priced leaf supplies in other areas where we have operations. U.S. leaf can only become competitive in the world market if the archaic and ineffective U.S. tobacco program undergoes major surgery. While there are a number of legislative proposals now circulating that would modify the program, and in some cases, even eliminate it, no consensus has yet emerged, raising questions as to the likelihood of needed congressional action in the near future. Zimbabwe continues to be a challenge. We are in the process of restructuring our operations there in response to expectations of smaller crops in the future and will take a charge of about $12.5 million before tax, or $6.5 million after taxes and minority interests, in our fourth quarter. In addition, the Company expects to recognize a fourth quarter gain of about $17 million, or approximately $12 million after minority interests, on remeasurement of local currency debt in the African region, resulting from government adjustment of the export exchange rate. This gain will not be taxable in the country of origin. Consistent with Company policy, there will be no provision for U.S. income taxes on the gain. Consequently, the Company expects its overall effective tax rate to be unusually low in fiscal year 2003 at approximately 32%. We are unable to estimate at this time the Company’s overall effective tax rate in fiscal year 2004, except the rate should return to 36%, at a minimum.

12

Difficult conditions continue for a number of our agri-product operations and for our lumber and building products distribution companies, which are affected by the soft economy in Europe, particularly in The Netherlands. However, we are pleased with the results of these operations this year given the very tough environment. We have experienced very strong sales of tobacco from Brazil and Argentina resulting in a very positive contribution to earnings. We remain confident that our strategy is working and that management is dealing effectively with the many challenges we face. We are looking forward to a good fourth quarter and expect net income for the full year to range between $110 million and $115 million, compared to $106.7 million last year.

Accounting Pronouncements

The Company has adopted Financial Accounting Standards Board Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” The interpretation addresses the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees. In addition, it clarifies the requirements related to the recognition of a liability by a guarantor at the inception of a guarantee for the obligations the guarantor has undertaken in issuing that guarantee. The adoption of FAS Interpretation No. 45 did not have a material impact on the Company’s financial statements. The disclosure requirement of Interpretation No. 45 is presented in Note 2 of Notes to Consolidated Financial Statements.

The Company also adopted Statement of Financial Accounting Standard No. 148, “Accounting for Stock-based Compensation – Transition and Disclosure.” This statement amended Statement No. 123, “Accounting for Stock-Based Compensation.” As permitted under Statement No. 123, the Company continues to apply the Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” Under this Statement, the Company is required to report pro forma net income and basic and diluted earnings per share each quarter as if the fair value-based method had been applied to all awards. This information is provided in Note 5 of Notes to Consolidated Financial Statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rates

Interest rate risk is limited in the tobacco business because customers usually pre-finance purchases or pay market rates of interest for inventory purchased for their accounts.

Our tobacco customers pay interest on tobacco purchased for their order. That interest is paid at rates based on current markets for variable rate debt. If we fund our committed tobacco inventory with fixed-rate debt, we may not be able to recover interest at that fixed rate if current market interest rates fall. As of March 31, 2003, tobacco inventory of $530.9 million comprised $457.4 million in inventory that was committed for sale to customers and $73.5 million that was not committed. Committed inventory, after deducting $103.7 million in customer deposits, represents our net exposure of $353.7 million. To manage that risk, we maintain a substantial portion of our debt at variable interest rates either directly or through interest rate exchange agreements. Our debt carried at variable interest rates either on its face or through derivative instruments was $582 million, in order to substantially mitigate interest rate risk related to

13

carrying fixed-rate debt. Of the $582 million in variable-rate debt, $123.5 million represented hedges of fixed rate debt in which we receive fixed rate payments and pay variable rate payments based on LIBOR. Although a hypothetical 1% change in short-term interest rates would result in a change in annual interest expense of approximately $6 million, about 60% of that amount should be offset with changes in customer charges.

Currency

The international tobacco trade generally is conducted in U.S. dollars, thereby limiting foreign exchange risk to that which is related to production costs and overhead in the source country. Most of the operations are accounted for using the U.S. dollar as the functional currency. Because there is no forward foreign exchange market in many of our major countries of tobacco origin, we manage our foreign exchange risk by matching funding for inventory purchases with the currency of sale, which is usually the U.S. dollar, and by minimizing our net investment in individual countries. In these countries, we are vulnerable to currency gains and losses to the extent that any local currency balances do not offset each other. These net exposures have been very small and vary seasonally; however, due to the adjustment of the Zimbabwe dollar export rate subsequent to our subsidiary’s third quarter balance sheet date, remeasurement of the local debt associated with restructuring charges will cause us to record a gain of approximately $17 million in our fourth quarter. Our recurring exchange gains and losses remain immaterial. We have recognized exchange losses in our statements of income of $4.3, $3.4, and $2.1 million in each of fiscal years 2002, 2001, and 2000 respectively, including $2.9 million, $1.7 million, and $1.6 million resulting from remeasurement.

Our lumber and building products operations, which are based in The Netherlands, use the euro as their functional currency. In certain non-export tobacco markets, we also use the local currency as the functional currency. Examples of these domestic markets are Poland, Hungary, and Canada. In each case, reported earnings are affected by the translation of the local currency into the U.S. dollar.

Commodity

We use commodity futures in our rubber trading business to reduce the risk of price fluctuations. We do not enter into rubber contracts for trading purposes. All forward commodity contracts are adjusted to fair market value during the year, and gains and losses are recorded in income at that time. The amount recorded during the nine months was not material.

Derivatives Policies

Hedging interest rate exposure using swaps and hedging foreign exchange exposure using forward contracts are specifically contemplated to manage risk in keeping with management’s policies. We may use derivative instruments, such as swaps, forwards, or futures, which are based directly or indirectly upon interest rates, currencies, and commodities, to manage and reduce the risks inherent in interest rate, currency, and price fluctuations.

We do not utilize derivatives for speculative purposes, and we do not enter into market risk sensitive instruments for trading purposes. Derivatives are transaction specific so that a specific debt instrument, contract, or invoice determines the amount, maturity, and other

14

specifics of the hedge. Counterparty risk is limited to institutions with long-term debt ratings of A or better.

ITEM 4. CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing of this report, the Company carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined by Rule 13a-14(c) under the Securities Exchange Act of 1934) under the supervision and with the participation of the Company’s chief executive officer and chief financial officer. Based on and as of the date of such evaluation, the aforementioned officers have concluded that the Company’s disclosure controls and procedures were effective.

The Company also maintains a system of internal accounting controls that is designed to provide assurance that assets are safeguarded and that transactions are executed in accordance with management’s authorization and properly recorded. This system is continually reviewed and is augmented by written policies and procedures, the careful selection and training of qualified personnel, and an internal audit program to monitor its effectiveness. There were no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of the Company’s most recent balance sheet.

15

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On February 26, 2001, Universal Leaf Tobacco Company, Incorporated, J.P. Taylor Company, Incorporated, and Southwestern Tobacco Company, Incorporated, who were subsidiaries of Universal Corporation at that time (the “Company Subsidiaries”), were served with the Third Amended Complaint, naming them and other leaf tobacco merchants as defendants in DeLoach, et al. v. Philip Morris Inc., et al., a suit originally filed against U.S. cigarette manufacturers in the United States District Court for the District of Columbia and now pending in the United States District Court for the Middle District of North Carolina, Greensboro Division (Case No. 00-CV-1235) (the “DeLoach Suit”). The DeLoach Suit is a class action brought on behalf of U.S. tobacco growers and quota holders that alleges that the defendants violated antitrust laws by bid-rigging at tobacco auctions and by conspiring to undermine the tobacco quota and price support program administered by the federal government. Plaintiffs seek injunctive relief, trebled damages in an unspecified amount, pre- and post-judgment interest, attorneys’ fees and costs of litigation. On April 3, 2002, the United States District Court for the Middle District of North Carolina issued an opinion and order certifying the class. The Company Subsidiaries petitioned the U.S. Court of Appeals for the Fourth Circuit for appeal of the class certification pursuant to Rule 23(f) of the Federal Rules of Civil Procedure, and the petition was denied. Trial is currently scheduled for April 2004. The Company Subsidiaries intend to vigorously defend the DeLoach Suit. The suit is still in its initial stages, and at this time no estimate can be made of the impact on the Company that could result from an unfavorable outcome at trial.

The Directorate General—Competition of the European Commission (“DG Comp”) is investigating the buying practices of Spanish tobacco processors with the stated aim of determining to what extent the tobacco processing companies have jointly agreed on raw tobacco qualities and prices offered to Spanish tobacco growers. After conducting an investigation, the Company believes that Spanish tobacco processors, including the Company’s Spanish subsidiary, Tabacos Espanoles, S.A. (“TAES”), have jointly agreed to the terms of sale of green tobacco and quantities to be purchased from associations of farmers and have jointly negotiated with those associations. TAES is cooperating fully with the DG Comp in its investigation and believes that there are unusual, mitigating circumstances peculiar to the highly structured market for green tobacco in Spain. At this time, no estimate can be made of the amount or timing of the fine, if any, that the DG Comp may assess on TAES.

16

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

No Current Reports on Form 8-K were filed during the quarter for which this report is filed.

17

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

18

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER REGARDING UNIVERSAL

CORPORATION’S QUARTERLY REPORT ON FORM 10-Q FOR

THE PERIOD ENDED MARCH 31, 2003

I, Allen B. King, President and Chief Executive Officer (Principal Executive Officer) of Universal Corporation, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Universal Corporation;

2. Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this Quarterly Report (the “Evaluation Date”); and

(c) presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies in the design or operation of internal controls that could adversely affect the registrant’s ability to record, process, summarize, and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this Quarterly Report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 8, 2003

19

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER REGARDING UNIVERSAL

CORPORATION’S QUARTERLY REPORT ON FORM 10-Q FOR

THE PERIOD ENDED MARCH 31, 2003

I, Hartwell H. Roper, Vice President and Chief Financial Officer (Principal Financial Officer) of Universal Corporation, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Universal Corporation;

2. Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this Quarterly Report (the “Evaluation Date”); and

(c) presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies in the design or operation of internal controls that could adversely affect the registrant’s ability to record, process, summarize, and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this Quarterly Report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 8, 2003

20